Due Diligence Done on SSB Loan to Santander

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Updated: February 9, 2016

The news of the 12 million dollar loan to Santander by the Social Security Board has garnered much attention and feedback on social media since we aired it on our news last Thursday.  Some are saying that the monies should be used for greater benefits to contributors while others are upset that the monies approved are for the Santander Company whose principals are from Guatemala.  Doug Singh, who chairs the SSB, however, spoke of what is being said in the public domain.

DOUG SINGH

I don’t know if we’ll ever get beyond the concern of the fact that while the company that the loan was approved to are Belizean companies that the principles of the companies most of them are Guatemalan citizens even if they are from Spanish extraction because the Rodriguez group they come from Spain. I don’t know if the Belizean public will get beyond that, that is a sore point and I think if it is that much of a fundamental issue and the concern about the creation of jobs and the fact that the investment is being made in Belize, if that is an issue I think they should weigh in. I think they have every right to weigh in and the board has the right to reassess it if they are legitimate concerns. A lot of what is being said that I have heard on the talk shows really is as a result of information not being available, that is one. So there is really not a true ability to do an assessment. The act does not necessarily provide for the public to do an assessment on these loans, it provides for the board of directors to do so. “

Earlier this week, Central Bank Governor, Glen Ysaguirre, spoke of how they had approached the issue of Santander borrowing monies from the local banks with a view of mitigating financial risks.  Chairman Singh agreed with the measures and assured Love News that SSB did do their due diligence prior to the loan approval.

DOUG SINGH

The governor I think is correct relative to trying to balance risk, that is really one of the major responsibilities of the Central Bank, they regulate the commercial banking system and they try to balance that risk exposure to any one industry to any one borrower and I think that they are always prudent in exercising that, maybe on a more conservative side but it’s their responsibility to do so, so the governor is right in that capacity. As far as evaluation of risk Social Security is not at any more risk than any of the other borrowers because we are all sharing exactly the same security, we are receiving payments from exactly the same collection there is no opportunity for just one of the borrowers to be paid and not the other the way the fund is established and the way the security is being managed. There is a collateral manager by way of Atlantic Bank and we are all borrowers and we have a pari passu relationship. What that means is that while we have loaned $6 million of the $60 million being borrowed from the domestic market that is about 10% of what is being borrowed from the domestic market. We are entitled to 10% of the security if there should ever be a liquidation. We are all in the same boat because we all share the same security. So from the standpoint of risk we are not at any greater risk than any of the commercial banks. It’s not a new project, the investments are already on the ground, it’s not like you are lending money to someone and you’re not sure what they are going to do with it, they’ve actually already delivered. Social Security collected about just over $300,000 last year from Social Security contributions from the companies through it’s employees. We expect that to grow as their projections show a total of about 1,000 employees during processing periods and between five and six hundred employees during the regular periods. It’s an expansion of an existing business in Belize.”

In an interview done with a local station on Sunday, Governor Ysaguirre did indicate that he was not aware of the loan facility from SSB to Santander as SSB does not fall under the control of the Central Bank.  Singh responded saying that they do try to keep communication channels opened at all times.

DOUG SINGH

We have in the past such as with the loans to Meridian, you would recall that there were some controversial loans one a citrus loan and one a banana loan. At the time we did that loan we wrote to the Central Bank of Belize and asked if they had any concerns relative to the Social Security extending loans to these two entities and the Central Bank wrote back and said that it’s not within their pervue to dictate who an institution lends to. We do try to reach out where we can if we think there are any concerns that might affect the banking industry, the credit relationship of the country and individuals as was in the case with Mr.John Zabaneh who was purportedly linked to these companies. We chose to exercise prudence wherever possible.”

Back in 2004 when there was the Senate Commission of Inquiry into a scandal at the Social Security Board, led by Senator Godwin Hulse, certain legislative amendments were made to ensure that due diligence is done and the public can weigh in on the loan decisions by the SSB.

DOUG SINGH

“The board approves loans but the board cannot entertains loans in their own rights. There is something called an investment committee that has it’s own board of directors and it’s own chairperson. When there was the scandals so to speak with respect to the lending of Social Security funds there were legislative amendments and it created an additional body, the investment committee. That investment committee has its own chairperson that includes someone from the Unions, the business community there might be one or to other representatives. They must first receive those loans and evaluate the loans and determine whether or not they are going to recommend the loan to the board of directors. They can recommend it to the board of directors and the board of directors can then choose to approve or not approve but the board of directors cannot entertain any loan in it’s own right. It must come from the investment committee. So there is a separation of functions to help to protect the fund and the whole publication is part and parcel to that exercise. This is taxpayers dollars, these are contributions made on behalf of individuals and from their salaries to provide for their employment injury benefits and their pensions and we have a responsibility to ensure that they are satisfied with the investments that they make. Provisions in the act do provide for publications before we actually disperse anything and we haven’t even publicized yet, we haven’t even issued a letter of loan offer to Santander. While the board has approved it it can be re reviewed and that is precisely what this process is of publicizing, it’s both to let the public know what Social Security is investing your funds in and to also offer an opportunity for people to provide feedback after they’ve gotten what information they need and after most of their concerns I would imagine have been addressed.”

As part of our mandate to educate our audience, it is crucial to take note that while some may be clamouring for increases in benefits to contributors or may be objecting to the loan approvals, in this case to Santander, the SSB Fund is used to invest with the objective of earning as much interest as possible in order to maintain the fund at a certain level while still having the ability to pay out benefits to contributors.  Singh explained that should the fund not be built upon then the Belizean people may face increases in social security contributions as was done in 2002.  As it relates to the Santander loan, there are several items listed off as collateral including all the land, equipment and machinery installed or acquired for the development as well as all the shares and the share registry of the shareholders of Santander Farms Ltd., Santander Sugar Limited among other entities.  These securities are held by all local lenders and will be shared should the loan defaults.